In October 2016, we issued Annual Benefit Statements to members for the Plan year to 31 March 2016.  Since then we have received some queries about the investment performance of certain funds in which members hold their retirement savings. We hope the following update will help you to understand more about what happened to investment markets over the period covered by your Annual Benefit Statement and also what has happened since then.

Market Background

• Your 2016 Annual Benefit Statement covers the period 1 April 2015 to 31 March 2016. Over this 12 month period most worldwide equity (share) markets, other than the US, fell in value when converted into Sterling. For example, the UK All Share index fell 3.9% and European markets overall were down 4.3% (when converted into Sterling).


• Since April 2016 worldwide equity markets have recovered significantly. For example, over the 6 months to 30 September 2016, the UK All Share index was up 12.8%. The returns from overseas equity markets in Sterling terms have also been helped by the weakness of the Pound before and after the Brexit referendum held in June 2016.


• We have shown at the bottom of this update the performance of the Plan’s Funds and benchmarks for the year to 31 March 2016 and also for the 6 months to 30 September 2016, to help you put things in context. Markets will always experience ups and downs, but in the long term they should generate a positive return for you.

What this means if you’re invested in the Lifestyle Option

• If you are in the Lifestyle Option and over 20 years from your selected retirement date, all of your money is invested in UK and overseas equity markets. Overall these fell in the year to 31 March 2016, but in the following six months, to 30 September 2016, they rose. You should note, however, that the fund in which you are invested (the ERSP Passive Global Equity Fund) is designed to remove most of the risk of foreign currency exchange rates changing. This means that the returns from the overseas equity part of the fund have not been quite as good as they would have been had the fund retained currency risk (due to the weakening of Sterling relative to other currencies).  


• If you are less than 20 years but 5 or more years from retirement you will have some money in equities and the rest spread across a wide range of other assets within the ERSP Active Diversified Assets Fund, which are intended to go up and down less than equity markets in the short term. Depending on how far you are away from your selected retirement date, you will have seen some increase in the value of your retirement savings from 31 March 2016 to 30 September 2016.


• If you are within 5 years of retirement your investment allocation will be dependent on how close you are to retirement and the benefit option(s) selected.  Investments may be a held in a combination of the Cash Active Fund, the Corporate Bonds Passive Fund, the Diversified Assets Active Fund or the Pre-Retirement Passive Fund.  With the exception of the Diversified Assets Active Fund, these funds performed positively over the Plan year, or since inception for funds introduced during the Plan Year.

What this means if you’re invested in the Adventurous Lifestyle Option

• If you are in the Adventurous Lifestyle Option and more than 10 years from your selected retirement date, you will be invested in our higher return seeking ERSP Active UK Equity Fund. This fund takes more risk in order to try to generate extra return. As you will already be aware from our previous communications, the performance of this fund has lagged behind the performance of the UK market index over recent years and this led to the Trustees recently adding a second UK equity manager, Baillie Gifford, so that the fund is now split 50/50 between the two managers. The performance of the ERSP Active UK Equity Fund has rebounded over the six months to the end of September and you will have seen a rise in the value of your retirement savings over the past 6 months.


• If you are less than 10 years but 5 or more years from retirement you will have some money in the ERSP Active UK Equity Fund and the remainder spread across a wide range of other assets within the ERSP Active Diversified Assets Fund, which are intended to go up and down less than equity markets in the short term. Depending on how far away you are from your selected retirement date, you will have seen some increase in value of your retirement savings from 31 March 2016 to the end of September 2016.


• If you are within 5 years of retirement your investment allocation will be dependent on how close you are to retirement and the benefit option(s) selected.  Investments may be a held in a combination of the Cash Active Fund, the Corporate Bonds Passive Fund, the Diversified Assets Active Fund or the Pre-Retirement Passive Fund.  With the exception of the Diversified Assets Active Fund, these funds performed positively over the Plan year, or since inception for funds introduced during the Plan Year.

 
What else should you bear in mind?

1. You should think of your retirement savings over the long term. There will be times when investment markets perform well and others when they perform poorly. In the long run however, investment markets have trended upwards. Additionally, if you’re an active member you and the company are putting money into your retirement savings pot on a monthly basis which means that at times you will be buying into markets after they have fallen in value. This offers an opportunity for higher growth because the investments you are buying are then relatively cheaper.


2. Our lifestyle strategies are designed so that the value of your retirement savings goes up and down in value less as you get closer to retirement. This is what has happened in the recent past.


3. The Trustees monitor the performance of all the funds that we offer to our members on a quarterly basis and take advice from our investment advisers on the ongoing suitability of the funds we offer. If necessary, we will make changes to the funds we offer to you (as we did recently with the ERPS Active UK Equity Fund).


4. If you have any further questions, please contact The Experian Pensions Team on 0114 229 8273 or at ExperianPensions@capita.co.uk. 


5. The table below shows the performance of each of the funds available in the Plan over the 12 months to 31 March 2016 and the six months to 30 September 2016, and below each fund, in italics, the return on the relevant benchmark index:

^{Source – Datastream/Hymans Robertson/Fidelity. *These funds were made available from 31 July 2015 and the returns shown are from this date.}

The information provided in this document does not constitute advice and is provided for information purposes only. Neither the Trustee nor the Experian Pensions Team can give you advice. If you feel that you need advice, you should contact a financial adviser. If you do not have a financial adviser, you can find one at www.unbiased.co.uk.